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F ederal reserve Bank DALLAS, TEXAS of Dallas 75222 C irc u la r No. 79-183 November 14, 1979 REGULATION E - ELECTRONIC FUND TRANSFERS Final Amendments TO ALL BANKS, OTHER CREDITORS, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: The Board of Governors of the Federal Reserve System has amended several sections of its Regulation E, Electronic Fund Transfers. Section 205.3(c) which exempts from coverage transfers made for the primary purpose of p u r chasing or selling securities, and Section 205.3(d) which exempts intrabank transfers between accounts and also exempts from coverage the automatic cred iting of interest to a savings account or the automatic debiting of a loan pay ment become effective November 15, 1979. New Section 205.6 concerning the liability of a consumer for unauthorized transfers is amended effective November 15, 1979. The other amendments are effective May 10, 1980. Member banks and others that maintain Regulations Binders should file the enclosed amendments in their Regulations Binder. Any questions regard ing Regulation E should be directed to the Consumer Affairs Section of our Bank Supervision and Regulations Department, Ext. 6171. Additional copies of these amendments will be furnished upon request to the Secretary's Office of this Bank, Ext. 6267. Sincerely yours, Robert H . Boykin First Vice President Enclosures B a n ks a nd o th e rs are e n c o u ra g e d to use th e fo llo w in g in c o m in g W A TS n u m b e rs in c o n ta c tin g th is Bank: 1-800-442-7140 (in tra s ta te ) and 1-800-527-9200 (in te rs ta te ). F o r c a lls p la ce d lo c a lly , p le a se use 651 p lu s th e e x te n s io n re fe rre d to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ELECTRONIC FUND TRANSFERS AMENDMENTS TO REGULATION E t 1. Effective September 10, 1979, section 205.5(c) is amended by deleting the third sentence, which reads, “Notice in writing is considered given at the time of receipt or, whether or not received, at the expiration of the time ordinarily required for transmission, whichever is earlier,” and substituting in its place “Notice in writing is considered given at the time the consumer deposits the notice in the mail or delivers the notice for transmission by any other usual means to the financial institution.” 2. Effective May 10, 1980, § 205.2 is amended by deleting the last sentence of paragraph (i), by redesignating paragraph (j) as (k), by adding new paragraph (j), by redesignating paragraph (k) as (1), and by revising paragraph (3) of new § 205.2(1), to read as follows: SECTION 205.2 — DEFINITIONS * * * * * regulated by the Securities and Exchange Commis sion or the Commodity Futures Trading Commis sion. (d) Certain automatic transfers. Any transfer under an agreement between a consumer and a financial institution which provides that the institu tion will initiate individual transfers without a spe cific request from the consumer (1) Between a consumer’s accounts within the financial institution, such as a transfer from a checking account to a savings account; (2) Into a consumer’s account by the finan cial institution, such as the crediting of interest to a savings account (except that the financial institution is subject to §§ 913(2), 915, and 916 of the Act); or (3) From a consumer’s account to an ac count of the financial institution, such as a loan payment (except that the financial institution is sub ject to §§ 913(1), 915, and 916 of the Act). * * * * * (j) “Preauthorized electronic fund transfer” 4. Effective May 10, 1980, § 205.4 is redesigna means an electronic fund transfer authorized in ad ted as § 205.5, and new § 205.4 is added, to read vance to recur at substantially regular intervals. as follows: (k) “State”*** (1) “Unauthorized electronic fund transfer”*** SECTION 205.4 — SPECIAL REQUIREMENTS (3) that is initiated by the financial institution or its employee. (a) Services offered by two or more finan 3. Effective November 15, 1979, § 205.3 is cial institutions. Two or more financial institutions amended by revising the introductory statement and that jointly provide electronic fund transfer services paragraphs (c) and (d), to read as follows: may contract among themselves to comply with the requirements that this regulation imposes on any or SECTION 205.3 — EXEMPTIONS all of them. When making disclosures under §§ 205.7 and 205.8, a financial institution that pro The Act and this regulation do not apply to the vides electronic fund transfer services under an following: agreement with other financial institutions need * * * * * make only those disclosures which are within its (c) Certain securities or commodities trans knowledge and the purview of its relationship with the consumer for whom it holds an account. fers. Any transfer the primary purpose of which is the purchase or sale of securities or commodities (b) [Reserved] t For this Regulation to be complete retain: 1) Printed Regulation pamphlet dated August 1, 1979. 2) This slip sheet. (Destroy slip sheet dated August 1979.) OCTOBER 1979 (c) Multiple accounts and account holders. (1) If a consumer holds two or more accounts at a financial institution, the institution may combine the disclosures required by the regulation into one statement (for example, the financial institution may mail or deliver a single periodic statement or annual error resolution notice to a consumer for multiple accounts held by that consumer at that in stitution). (2) If two or more consumers hold a joint account from or to which electronic fund transfers can be made, the financial institution need provide only one set of the disclosures required by the regu lation for each account. (d) Additional information; disclosures re quired by other laws. At the financial institution’s option, additional information or disclosures re quired by other laws (for example, Truth in Lending disclosures) may be combined with the disclosures required by this regulation. 5. Effective May 10, 1980, new § 205.5 is amended by revising paragraph (b)(2) and by delet ing paragraph (d), to read as follows: SECTION 205.5 — ISSUANCE OF ACCESS DEVICES * * * * * (b) Exception.*** (1) *** (2) The distribution is accompanied by a com plete disclosure, in accordance with § 205.7(a), of the consumer’s rights and liabilities that will apply if the access device is validated; * * * * * 6. Effective November 15, 1979, former § 205.5 is amended by redesignating it as § 205.6 and by revising paragraphs (a)(3)(i) and (b), to read as fol lows: the advisability of prompdy reporting loss or theft of the access device or unauthorized transfers. * * * * * (b) Limitations on amount of liability. The amount of a consumer’s liability for an unauthor ized electronic fund transfer or a series of related unauthorized transfers shall not exceed $50 or the amount of unauthorized transfers that occur before notice to the financial institution under paragraph (c) of this section, whichever is less, unless one or both of the following exceptions apply: * * * * * 7. Effective May 10, 1980, §§ 205.7, 205.8, 205.10(b), (c), and (d), 205.12, and 205.13 are added, to read as follows: SECTION 205.7 — INITIAL DISCLOSURE OF T E R M S A N D CONDITIONS (a) Content of disclosures. At the time a con sumer contracts for an electronic fund transfer ser vice or before the first electronic fund transfer is made involving a consumer’s account, a financial institution shall disclose to the consumer, in a read ily understandable written statement, the following terms and conditions of the electronic fund transfer service, as applicable: (1) A summary of the consumer’s liability un der § 205.6, or other applicable law or agreement, for unauthorized electronic fund transfers and, at the financial institution’s option, the advisability of promptly reporting loss or theft of the access device or unauthorized transfers. (2) The telephone number and address of the person or office to be notified when the consumer believes that an unauthorized electronic fund trans fer has been or may be made. (3) The financial institution’s business days, as determined under § 205.2(d). SECTION 205.6 — LIABILITY OF C O N S U M E R (4) The type of electronic fund transfers that FOR U N A U T H O R I Z E D TRANSFERS the consumer may make and any limitations on the frequency and dollar amount of transfers. The de (a) General rule.*** (3) *** tails of the limitations need not be disclosed if their (i) A summary of the consumer’s liability under confidentiality is essential to maintain the security of the electronic fund transfer system. this section, or under other applicable law or agree ment, for unauthorized electronic fund transfers (5) Any charges for electronic fund transfers or and, at the financial institution’s option, notice of for the right to make transfers. (6) A summary of the consumer’s right to re ceive documentation of electronic fund transfers, as provided in §§ 205.9, 205.10(a), and 205.10(d). (7) A summary of the consumer’s right to stop payment of a preauthorized electronic fund transfer and the procedure for initiating a stop-payment or der, as provided in § 205.10(c). (8) A summary of the financial institution’s li ability to the consumer for its failure to make or to stop certain transfers under § 910 of the Act. (9) The circumstances under which the finan cial institution in the ordinary course of business will disclose information to third parties concerning the consumer’s account. (10) A notice that is substantially similar to the following notice concerning error resolution pro cedures and the consumer’s rights under them: I n C a s e o f E r r o r s o r Q u e s t io n s A b o u t Y o u r E l e c t r o n ic T r a n s f e r s Telephone us at [insert telephone number] or Write us at [insert address] as soon as you can, if you think your statement or receipt is wrong or if you need more information about a transfer listed on the statement or receipt. W e must hear from you no later than 60 days after we sent you the FIRST statement on which the problem or error appeared. (1) Tell us your name and account number (if any). (2) Describe the error or the transfer you are unsure about, and explain as clearly as you can why you believe it is an error or why you need more information. (3) Tell us the dollar amount of the suspected error. If you tell us orally, we may require that you send us your complaint or question in writing within 10 business days. W e will tell you the results of our investigation within 10 business days after we hear from you and will correct any error promptly. If we need more time, however, we may take up to 45 days to inves tigate your complaint or question. If we decide to do this, we will recredit your account within 10 business days for the amount you think is in error, so that you will have the use of the money during the time it takes us to complete our investigation. If we ask you to put your complaint or question in writing and we do not receive it within 10 business days, we may not recredit your account. If we decide that there was no error, we will send you a written explanation within 3 business days after we finish our investigation. You may ask for copies of the documents that we used in our investi gation. (b) Timing of disclosures for accounts in ex* istence on May 10, 1980. A financial institution shall mail or deliver to the consumer the informa tion required by paragraph (a) of this section on or before June 9, 1980, or with the first periodic state ment required by § 205.9(b) after May 10, 1980, whichever is earlier, for any account that is open on May 10, 1980, arid (1) From or to which electronic fund transfers were made prior to May 10, 1980; (2) With respect to which a contract for such transfers was entered into between a consumer and a financial institution; or (3) For which an access device was issued to a consumer. SECTION 205.8 — C H A N G E IN TERMS; E R R O R RESOLUTION NOTICE (a) Change in terms. A financial institution shall mail or deliver a written notice to the con sumer at least 21 days before the effective date of any change in a term or condition required to be disclosed under § 205.7(a) if the change would re sult in increased fees or charges, increased liability for the consumer, fewer types of available elec tronic fund transfers, or stricter limitations on the frequency or dollar amounts of transfers. Prior no tice need not be given where an immediate change in terms or conditions is necessary to maintain or restore the security of an electronic fund transfer system or account. However, if a change required to be disclosed under this paragraph is to be made permanent, the financial institution shall provide written notice of the change to the consumer on or with the next regularly scheduled periodic statement or within 30 days, unless disclosure would jeopar dize the security of the system or account. (b) Error resolution notice. For each account from or to which electronic fund transfers can be made, a financial institution shall mail or deliver to the consumer, at least once each calendar year, the notice set forth in § 205.7(a)(10). Alternatively, a financial institution may mail or deliver a notice that is substantially similar to the following notice on or with each periodic statement required by § 205.9(b): I n C a s e o f E r r o r s o r Q u e s t io n s A b o u t Y o u r E l e c t r o n ic T r a n s f e r s Telephone us at [insert telephone number] or Write us at [insert address] as soon as you can, if you think your statement or receipt is wrong or if you need more information about a transfer on the statement or receipt. W e must hear from you no later than 60 days after we sent you the FIRST statement on which the error or problem appeared. (1) Tell us your name and account number (if any). (2) Describe the error or the transfer you are unsure about, and explain as clearly as you can why you believe there is an error or why you need more information. (3) Tell us the dollar amount of the suspected error. W e will investigate your complaint and will cor rect any error promptly. If we take more than 10 business days to do this, we will recredit your account for the amount you think is in error, so that you will have use of the money during the time it takes us to complete our investigation. SECTION 205.10 — PREAUTHORIZED TRANSFERS (a) [Reserved] (b) Preauthorized transfers from a con sumer’ s account; written authorization. Pre authorized electronic fund transfers from a consumer’s account may be authorized by the con sumer only in writing, and a copy of the authoriza tion shall be provided to the consumer by the party that obtains the authorization from the consumer. (c) Consumer’ s right to stop payment. A consumer may stop payment of a preauthorized electronic fund transfer from the consumer’s ac count by notifying the financial institution orally or in writing at any time up to 3 business days before the scheduled date of the transfer. The financial in stitution may require written confirmation of the stop-payment order to be made within 14 days of an oral notification if, when the oral notification is made, the requirement is disclosed to the consumer together with the address to which confirmation should be sent. If written confirmation has been re quired by the financial institution, the oral stoppayment order shall cease to be binding 14 days after it has been made. (d) Notice of transfers varying in amount. Where a preauthorized electronic fund transfer from the consumer’s account varies in amount from the previous transfer relating to the same authorization, or the preauthorized amount, the financial institu tion or the designated payee shall mail or deliver, at least 10 days before the scheduled transfer date, a written notice of the amount and scheduled date of the transfer. If the financial institution or designated payee informs the consumer of the right to receive notice of all varying transfers, the consumer may elect to receive notice only when a transfer does not fall within a specified range of amounts or, al ternatively, only when a transfer differs from the most recent transfer by more than an agreed-upon amount. SECTION 205.12 — RELATION TO STATE LAW (a) Preemption of inconsistent state laws. The Board shall determine, upon the request of any state, financial institution, or other interested party, whether the Act and this regulation preempt state laws relating to electronic fund transfers. Only those state laws that are inconsistent with the Act and this regulation shall be preempted and then only to the extent of the inconsistency. A state law is not inconsistent with the Act and this regulation if it is more protective of a consumer. (b) Standards for preemption. The following are examples of the standards the Board will apply in determining whether a state law, or a provision of that law, is inconsistent with the Act and this regulation. Inconsistency may exist when state law (1) Requires or permits a practice or act prohi bited by the Act or this regulation; (2) Provides for consumer liability for un authorized electronic fund transfers which exceeds that imposed by the Act and this regulation; (3) Provides for longer time periods than the Act and this regulation for investigation and correc tion of errors alleged by a consumer, or fails to provide for the recrediting of the consumer’s ac count during the institution’s investigation of errors as set forth in § 205.11(c); or (4) Provides for initial disclosures, periodic statements, or receipts that are different in content from that required oy the Act and this regulation except to the extent that the disclosures relate to rights granted to consumers by the state law and not by the Act or this regulation. (c) Procedures for preemption. Any request for a determination shall include the following: (1) A copy of the full text of the state law in question, including any regulatory implementation or judicial interpretation of that law; (2) A comparison of the provisions of state law with the corresponding provisions in the Act and this regulation, together with a discussion of reasons why specific provisions of state law are ei ther consistent or inconsistent with corresponding sections of the Act and this regulation; and (3) A comparison of the civil and criminal lia bility for violation of state law with the provisions of §§ 915 and 916(a) of the Act. (d) Exemption for state-regulated transfers. (1) Any state may apply to the Board for an exemp tion from the requirements of the Act and the corre sponding provisions of this regulation for any class of electronic fund transfers within the state. The Board will grant such an exemption if the Board determines that (1) Under the law of the state that class of electronic fund transfers is subject to requirements substantially similar to those imposed by the Act and the corresponding provisions of this regulation, and (ii) There is adequate provision for state enforce ment. (2) To assure that the federal and state courts will continue to have concurrent jurisdiction, and to aid in implementing the Act: (i) No exemption shall extend to the civil lia bility provisions of § 915 of the Act; and (ii) After an exemption has been granted, for the purposes of § 915 of the Act, the requirements of the applicable state law shall constitute the re quirements of the Act and this regulation, except to the extent the state law imposes requirements not imposed by the Act or this regulation. SECTION 205.13 — ADMINISTRATIVE ENFORCEMENT (a) Enforcement by federal agencies. (1) Ad ministrative enforcement of the Act and this regula tion for certain Financial institutions is assigned to the Comptroller of the Currency, Board of Gov ernors of the Federal Reserve System, Board of Directors of the Federal Deposit Insurance Corpora tion, Federal Home Loan Bank Board (acting di rectly or through the Federal Savings and Loan In surance Corporation), National Credit Union Ad ministration Board, Civil Aeronautics Board, and Securities and Exchange Commission. (2) Except to the extent that administrative en forcement is specifically committed to other authori ties, compliance with the requirements imposed un der the Act and this regulation is enforced by the Federal Trade Commission. (b) Issuance of staff interpretations. (1) Un official staff interpretations are issued at the staff’s discretion where the protection of § 915(d) of the Act is neither requested nor required, or where a rapid response is necessary. (2)(i) Official staff interpretations are issued at the discretion of designated officials. No interpre tations will be issued approving financial institu tions’ forms or statements. Any request for an offi cial staff interpretation of this regulation shall be made in writing and addressed to the Director of the Division of Consumer Affairs, Board of Gov ernors of the Federal Reserve System, Washington, D.C. 20551. The request shall contain a complete statement of all relevant facts concerning the trans fer or service, and shall include copies of all perti nent documents. (ii) Within 5 business days of receipt of a re quest, an acknowledgment will be sent to the per son making the request. If the designated officials deem issuance of an official staff interpretation to be appropriate, the interpretation will be published in the Federal Register to become effective 30 days after the publication date. If a request for public comment is received, the effective date will be sus pended. The interpretation will then be republished in the Federal Register and the public given an op portunity to comment. Any official staff interpreta tion issued after opportunity for public comment shall become effective upon publication in the Fed eral Register. (3) Any request for public comment on an flect the institutions’ electronic fund transfer ser official staff interpretation of this regulation shall be made in writing and addressed to the Secretary, vices. Board of Governors of the Federal Reserve System, Financial institutions need not use any of the Washington, D.C. 20551. It must be postmarked or clauses, but may use clauses of their own design in conjunction with the model clauses. The inapplica received by the Secretary’s office within 30 days of the interpretation’s publication in the Federal Regis ble words or portions of phrases in parentheses should be deleted. The underscored catchlines are ter. The request shall contain a statement setting not part of the clauses and should not be used as forth the reasons why the person making the request such. Financial institutions may make alterations, believes that public comment would be appropriate. (4) Pursuant to § 915(d) of the Act, the substitutions, or additions in the clauses in order to reflect the services offered, such as technical Board has designated the Director and other offi cials of the Division of Consumer Affairs as offi changes (e.g., substitution of a trade name for the word “card,” deletion of inapplicable services, or cials “duly authorized” to issue, at their discretion, substitution of lesser liability limits in § A(2)). Sec official staff interpretations of this regulation. (c) Record retention. (1) Evidence of compli tions A(3) and A(9) include references to a tele ance with the requirements imposed by the Act and phone number and address. Where two or more of this regulation shall be preserved by any person these clauses are used in a disclosure, the telephone number and address need not be repeated if refer subject to the Act and this regulation for a period of not less than 2 years. Records may be stored by use enced. of microfiche, microfilm, magnetic tape, or other * * * * * methods capable of accurately retaining and repro SECTION A(8) — DISCLOSURE OF RIGHT TO ducing information. (2) Any person subject to the Act and this reg RECEIVE D O C U M E N T A T I O N OF TRANSFERS (§§ 205.5(b)(2), 205.7(a)(6)) ulation that has actual notice that it is being in vestigated or is subject to an enforcement proceed (a) Terminal transfers. You can get a receipt at ing by an agency charged with monitoring that the time you make any transfer to or from your person’s compliance with the Act and this regula account using one of our (automated teller tion, or that has been served with notice of an ac machines) (or) (point-of-sale terminals). tion filed under §§ 915 or 916(a) of the Act, shall (b) [Reserved] retain the information required in paragraph (c)(1) (c) Periodic statements. You will get a (monthof this section that pertains to the action or proceed lyHquarterly) account statement (unless there are no ing until final disposition of the matter, unless an transfers in a particular month. In any case you will earlier time is allowed by order of the agency or get the statement at least quarterly). court. (d) Passbook account where the only possi 8. Effective May 10, 1980, Appendix A is ble electronic fund transfers are preauthorized amended by revising the introductory statement and credits. If you bring your passbook to us, we will by adding §§ A(8)(a), (c), (d), (9), and (10), to record any electronic deposits that were made to read as follows: your account since the last time you brought in your passbook. APPENDIX A — M O D E L DISCLOSURE CLAUSES This appendix contains model disclosure clauses for optional use by financial institutions to facilitate compliance with the disclosure requirements of §§ 205.5(a)(3), (b)(2), and (b)(3), 205.6(a)(3), and 205.7. Section 915(d)(2) of the Act provides that use of these clauses in conjunction with other re quirements of the regulation will protect financial institutions from liability under §§915 and 916 of the Act to the extent that the clauses accurately re SECTION A(9) — DISCLOSURE OF RIGHT TO STOP P A Y M E N T OF PREAUTHORIZED TRANSFERS, P R O C E D U R E FOR DOING SO, RIGHT T O RECEIVE NOTICE OF VARYING AMOUNTS, A N D FINANCIAL INSTITUTION’S LIABILITY FOR FAILURE TO STOP P A Y M E N T (§§ 205.5(b)(2), 205.7(a)(6), (7), and (8)) (a) Right to stop payment and procedure for doing so. If you have told us in advance to make regular payments out of your account, you can stop any of these payments. Here’s how: Call us at [insert telephone number], or write us at [insert address], in time for us to receive your request 3 business days or more before the payment is scheduled to be made. If you call, we may also require you to put your request in writing and get it to us within 14 days after you call. (We will charge you [insert amount] for each stop-payment order you give.) (b) Notice of varying amounts. If these regu lar payments may vary in amount, (we) (the person you are going to pay) will tell you, 10 days before each payment, when it will be made and how much it will be. (You may choose instead to get this no tice only when the payment would differ by more than a certain amount from the previous payment, or when the amount would fall outside certain limits that you set.) (c) Liability for failure to stop payment of preauthorized transfer. If you order us to stop one of these payments 3 business days or more be fore the transfer is scheduled, and we do not do so, we will be liable for your losses or damages. SECTION A(10) — DISCLOSURE OF FINANCIAL INSTITUTION’S LIABILITY FOR FAILURE T O M A K E TRANSFERS (§§ 205.5(b)(2), 205.7(a)(8)) (a) Liability for failure to make transfers. If we do not properly complete a transfer to or from your account according to our agreement with you, we will be liable for your losses or damages. How ever, there are some exceptions. W e will not be liable, for instance: • If, through no fault of ours, your account does not contain enough money to make the transfer. • If the transfer would go over the credit limit on your overdraft line. • If the automated teller machine where you are making the transfer does not have enough cash. • If the (terminalXsystem) was not working properly and you knew about the breakdown when you started the transfer. • If circumstances beyond our control (such as fire or flood) prevent the transfer. • There may be other exceptions.
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